UCSP MODULE #4: NON- STATE INSTITUTIONS

Non-state institutions

This are groups and organizations which operate outside the support of any state or government. They
are referred to be ‘stateless’ since they are considered to be independent of any state, although, they
usually collaborate with the government in implementing projects. Non-state institutions assume
different functions and focus on a specific objective. In general, they develop certain services needed by
members of the society for their progress.

There are different non-state institutions that operate in society. Two of them are banks and
corporations.

Banks

The term ‘bank’ has no single definition for many authors have provided their own definition of it. For
the purposes of uniformity, we define a bank as a financial institution licensed to provide several
financial services to different types of customers. Banks are in operation mainly for their deposit and
lending function. Customers are allowed to deposit their money to banks which grow through an
interest rate. Banks also provide loans, at a higher interest rate, to customers who need money either
for personal consumption or for investment and businesses. This process of taking in deposits and
lending them to customers in need is called financial intermediation. This means that the bank serves as
a connecting link between its depositors and borrowers of money.

Banks also act as a custodian of customer’s money, which help guarantee the safety of each deposit.
When a person puts his money in a bank, the amount given is maintained in a deposit or savings account
which prevents the risk of theft and robbery. Certain types of bank accounts also make it possible for
customers to withdraw money as needed. This ensures a more secured transaction of funds. Some
secondary functions of a bank include money remittance, which make it easier for people to send
money from one place to another. This holds importance especially for overseas Filipino workers (OFWs)
who provide financial assistance to their families in the Philippines. Most banks also accept payments to
house and other utilities such as electricity and water utility. This function of the bank eases the
transaction of its customers with utility companies.

Other bank functions include currency exchange, allowing customers to convert foreign currencies to
another currency they need and safety deposit boxes, which provides customers a safe place to keep
their priced possessions (e.g. gold, silver, or jewelries). Due to the countless services that banks provide,
there are types of bank which only specialize in a specific bank function. However, there is no clear line
categorizing banks to a classification since one bank may engage itself in several functions. In this case, a
specific bank can be classified into two or more bank types. Some of the most common types of banks
are as follows:

A retail bank is a type of bank that focuses on consumers or the general public as its customers. One’s
personal bank account, like checking and savings account, are usually in a retail bank. Retail banks can
be considered to be the most common and widespread of all the types of banks.
 A commercial bank also provides the same services as a retail bank; however, it focuses on businesses
and businessmen as its main customers. Commercial banks provide short term loans for businessmen to
be used for investment purposes.

An investment or an industrial bank provide medium and long-term loans and deposits to business
industries.

Agricultural banks, as the name suggests, caters to the financial needs of farmers and the farming
industry. They provide short-term and long-term loans to facilitate agricultural activities. Loans from this
type of bank is used for buying seeds, fertilizers, land, or any materials needed for farming. An
agricultural country such as the Philippines is unsurprisingly abundant of agricultural banks. Examples of
which are the The central bank is the main financial institution in a country since it supervises the
monetary system in the country. It functions as a regulating institution to all other banks in a country
and it issues all the bank notes (or money bills) and coins of the country in which it operates. The Bangko
Sentral ng Pilipinas is the central bank of the Philippines. A central bank is the only banking institution
established through a special law of the government, which makes the government of great influence to
its central bank.

If you try to think of companies and businesses you know, it is possible that some of them are
corporations, since corporations are one of the most commonly known non-state institutions.

A corporation is an organization, created by a group of people known as shareholders, which is legally

recognized to act as a single person in carrying out certain goals and objectives. As a ‘legal person’, a
corporation is mandated to enjoy the rights, privileges, and responsibilities of an individual. Using its
own name, a corporation has the right to enter into contracts, to hire employees, and to loan and
borrow money. It is also authorized to have its own assets.

Any corporation-owned property belongs to the corporation itself and not to the owners of the
corporation. Like most individuals, a corporation is also obligated to pay taxes. This non-state institution
is created to operate businesses and to pursue a common objective, may it be profit-oriented or not.
Although, many corporations are usually set up for profit. It is important to take note that a corporation
is a distinct and separate entity from the people who own it. This enables the corporation to have
powers and liabilities of its own. Any debt of the corporation is the responsibility of only the corporation
itself; shareholders cannot be personally held accountable for these debts. This feature also enables the
corporation to sue and be sued in behalf of its name. Any lawsuits directed to the corporation is solely
the responsibility of the corporation itself and not of its owners.

There are different types of corporations that are classified based on specific factors like the
corporation’s purpose, manner of taxation, and number of shareholders.

A business corporation is created to operate and to generate profit. Companies like McDonald’s and
Starbucks are examples of a business corporation.

A non-profit corporation is established with a purpose of serving the public rather than pursuing
profits.

A corporation whose income is taxed through the corporation itself is a C-corporation.

 An S-corporation is taxed through its shareholders. An S-corporation can only have less than 100
shareholders, unlike a C-corporation which can have an unlimited number of shareholders.

Banks, Corporations and their Social Implications

Banks and corporations both play a part in the economic growth of society. As mentioned earlier,
financial intermediation in a bank allows the institution to issue loans to borrowing customers
(individual or group) who need money for their investment, at a higher interest rate. This loan will, then,
facilitate businesses and investments. In short, loans from the bank will keep businesses going.
Continued operation of businesses leads to greater chances of generating more income for the business
and increasing employment. More income would entail more savings to be deposited in a bank which
will be used to lend to future customers. In this case, it can be seen that the bank plays a role in
facilitating the cycle of expediting investments and generating more income and savings.

Cooperatives

According to the International Labor Organization (ILO), a cooperative is “an autonomous association of
persons united voluntarily to meet their common economic, social, and cultural needs and aspirations,
through a jointly owned and democratically controlled enterprise”. Members of a cooperative usually
joins together in order to achieve a specific objective, an objective which usually benefits the members
of the organization itself. In short, cooperatives are mainly structured to benefit its members and to
satisfy its members’ needs. In a cooperative, the people who use its products or services are the same
people who own and control the organization. Cooperatives exist among different industries and are
composed of different types of people, may it be farmers, consumers, or workers.

There are several principles that uniquely characterize this non-state institution. It is an essential
characteristic of a cooperative that its owners and financers are also the people who use the
cooperative.

Meaning, in a typical cooperative, the customers are also the ones who own the organization. These
members or users are also the ones who have control over the cooperative. They have the power to
elect a board of directors which will handle the overall operation of the organization. Users or
customers of a cooperative are also the ones who benefit from it. To have a clearer grasp of these
principles characterizing cooperatives, let us look at an example of a consumer cooperative. The
function of a consumer cooperative is to provide products and commodities needed by people. A
consumer cooperative may put up a supermarket to satisfy this necessity for certain products.

The people that serve as primary customers of the supermarket are usually the people who created the
cooperative itself. They created the cooperative because they needed an organization that would meet
their specific objective. Since these customers are the financers and owners of the cooperative, they
also have the power and control to elect their board of directors through a democratic election (i.e. one
vote per member). The board is expected to spearhead the general operation of the supermarket.

Although non-members of the cooperative can also shop and be customers in the said supermarket,
only cooperative members are entitled to benefits and profits of the organization. Assuming that the
supermarket generated a profitable income, the cooperative must distribute this profit to its customers
who are also members and owners of the association. Benefits from such profits can be monetary in
form or discounts to products sold.
The International Cooperative Alliance also came up with seven principles to characterize a cooperative.

These principles are as follows:

(a) voluntary and open membership,

(b) democratic member control,

(c) member economic participation, (d) autonomy and independence,

(e) education, training and information,

(f) cooperation among cooperatives, and

(g) concern for the community.

There are several types of cooperatives, depending on its specific function and purpose.

A credit cooperative provides financial services to its members, including securing savings and
creating funds to be used for issuing loans.

A consumer cooperative operates mainly to obtain and distribute products and commodities to its
customers, both members and non-members.

Producer cooperatives aids those in the sector of production, either agricultural or industrial. A
subtype of a producer cooperative is agricultural cooperatives which help producers or farmers in
marketing their crops as well as in purchasing supplies needed for further production.

A service cooperative (or a worker cooperative) concentrates on helping workers in the service-
oriented occupations (i.e. health care, transportation, labor) by creating employment opportunities and
other benefits to its members.

A multi-purpose cooperative undertakes two or more functions of different cooperatives. For

example, multi-purpose cooperative could act as a consumer cooperative and establish a supermarket.
At the same time, it could also provide financial services like a credit cooperative.

Trade Unions

Part of the universal human rights of every individual is his right to organize and form associations that
would protect his rights as a worker; the embodiment of this right is trade unions. A trade union or labor
union is an organization with a membership composed of workers or employees from related fields,
which aim to represent the interests and rights of its members, both in the workplace and in the society.

While an individual has the capacity to demand better conditions from his employer, trade unions
recognize that a unity of several employees would act as a more powerful tool in advancing these
interests. This is how trade unions became the voice of the workers to the management; they serve as
link between employees and their employers. Trade unions work to improve certain issues like wage
adjustment, good working environment, and rewards and other benefits.

There are different types of trade unions according to its members.

 A general union represents workers with a range of jobs and skills, from different industries and
companies. An example of this type of union is a trade union of drivers, janitors and office workers.

Industrial unions are composed of workers from one particular industry, across different levels of the
hierarchy. A trade union of all employees who work in the mining industry (with different levels and
positions) is an example of an industrial union.

A craft union seeks to represent skilled workers doing the same work who may be employed in
different industries. A craft union of carpenters is one example.

A white-collar union is composed of professionals doing similar jobs across different industries. A
trade union of teachers and professors is an example of a white-collar union.

Although there are many types of trade unions, these classifications still perform the same functions
expected from a trade union. In addition, a trade union may not only be limited to a particular company.
here are unions in the Philippines which are composed of several workers from different companies.

Defining Transnational Advocacy Groups

To have a general understanding of what a transnational advocacy group is, it is better to first
individually define terms that make of it. The word ‘transnational’ denotes something that goes beyond
one’s national borders. ‘Advocacy’ can be defined as issues or causes that are being defended or
supported by a certain group of people known as advocates. A ‘group’, as you were familiarized in
previous lessons, is generally defined as a collection of individuals with significant relations among each
other.

Combining these terms and definitions, we may define a transnational advocacy group as a collection of
actors (individuals or groups) characterized by their fluid and open relations with each other, united by
their commitment to work on and defend certain issues and causes that are relevant across several
nations. They “use the power of information, ideas, and strategies to influence the value context within
which states make policies”. Transnational advocacy groups are also referred to as “transnational
advocacy networks” due to the nature of actors’ connection with each other.

As discussed in a previous lesson, networks are a web of weak social ties among groups and individuals.
This definition may also apply to the relationship of actors in a transnational advocacy group. Actors in
the group can be a combination of advocates and activists, non-government organizations, foundations,
church, media, politicians, or corporate business actors. Their relationships are not highly structured and
crystallized but they are loosely organized and connected as they share values and exchange
information about certain issues which they are committed to promote.

The word ‘transnational’ characterize this network of actors since members of a transnational advocacy
group come from different nations involved. In addition, the term ‘transnational’ also illustrates the
group’s involvement to certain ‘trans-sovereign’ issues— issues that exist in multiple countries. These
issues include human rights, women’s rights, environmental protection, and indigenous peoples’ rights.

Functions and Strategies

The main function of a transnational advocacy group is the creation and development of advocacies and
campaigns about certain causes, issues, ideas, values and beliefs. These campaigns aim to motivate
changes in policies, which are necessary for the betterment of people involved. Since this non-state
institution do not have inherent power to make instant policy changes in the state, they use, instead,
the power of information dissemination, together with other strategies, to influence state actors who
are in legitimate position to create such changes.

Keck and Sikkink named four tactics used by transnational advocacy groups to influence the state’s
behavior and policy making. These are information politics, symbolic politics, leverage politics, and
accountability politics.

First, information politics is the ability to produce and circulate accurate and credible ideas and
information to persuade people and motivate them to take action. Transnational advocacy groups do
these through campaigns and other ways of communication.

Symbolic politics is the ability of the group to interpret and use symbols or stories in such a way that it
would emphasize the issue at hand. They provide explanations about an event and connects it to the
specific cause. For example, the death and extinction of certain animal species may be used by
environmental advocacy groups to raise awareness about environmental degradation.

Leverage politics enables transnational advocacy groups to use some form of leverage, to tap and
influence target actors that are powerful enough to institute policy changes. These powerful actors may
come from the government, larger institutions (e.g. World Bank), or even corporate business owners.

Lastly, accountability politics happens as transnational advocacy groups convince state actors to change
their position about certain issues, and persuades them further to act upon their verbal support about
certain issues. Advocacy groups can use their power of information to expose the discrepancy between
an actor’s words and his action. Let’s take for example, a senator who verbally expressed his support
about protecting indigenous peoples’ rights. In this scenario, the senator has confirmed his position
about the issue, but he does not make any concrete actions in support of the cause. Because of this,
advocacy groups may point out to the public, the inconsistency between the senator’s words and his
actions (or lack thereof). This will then push the senator be true to his word and translate them into
concrete operations.

Development Agencies

The establishment of development agencies can be found in history. In the Second World War, many
countries had been grounds for attacks and bombings which resulted to crises such as starvation and
food scarcity, among others. Because of these, many European countries saw the need for the creation
of an organization that would attend to the crises brought about by the war.

Development agencies were formed as a response to crises like war damage and industrial decline. In
some countries, such agencies were established with the hope of stimulating economic development,
post- war. Development agencies have come a long way since they were first established, as thousands
of them are currently operating within the globe.

Nonetheless, there is still no solid formula to create this type of non-state institution since different
development agencies across the world have a range of specific functions and roles. This lack of
common understanding about development agencies makes it more difficult to define it. In general, we
refer to development agencies as groups or entities that are tasked and committed to pursue certain
developmental agendas of a state. They are an institution that provides help in support of a state’s
economic growth and social progress.

Roles of Development Agencies

As mentioned earlier, development agencies have a range of tasks. It is, however, important to note that
it is up to the organization to decide which among the wide array of tasks they will pursue. Normally,
specific tasks of a development agency are dependent on the aspect of development it focuses on. In a
research commissioned by the Organization for Economic Cooperation and Development (OECD), the
roles of development agencies may include;

A. strategic roles, such as coordinating with local actors and international donors, monitoring the local
economy, and strategic planning for economic and local development;

B. asset and investment roles, such as land and property management, funding and investing in local
development projects, income generation, and provision of grants or donations for other organizations;

C. innovation, enterprise, skills, and employment roles, which include workforce and skills
development, employment creation, and support of small and medium scale businesses;

D. promotional roles, like foreign investment promotions and project management; and;

E. capacity building roles which include providing technical assistance to other local development
organizations and informing them of good practices and models.

The word international organization is an umbrella term used to refer to institutions established by
three or more states as voluntary members, formed through a formal agreement or treaty, in order to
promote cooperation and coordination among them. Members of an international organization work
together for the development and management of their common interests.

The main feature and characteristic of an international organization which distinguishes it from other
non-state institutions, is that its membership is entirely composed of national states or governments.
These member states give power to the international organization which gives the institution some
degree of authority to manage and govern the same member states. International organizations tend to
focus on different agendas. The decision of what agendas to pursue by an organization exclusively
depends on the interests of its members. Some agendas may be economic (e.g. finance and
investments), humanitarian (e.g. human welfare, human rights), or environmental (e.g. global warming,
climate change, biodiversity) in nature.

Significance of International Organizations

International organizations provide an avenue for different countries and states to connect. This
connection among countries help form international laws, norms, and ideas, which in turn strengthen
the relationship among member states. These norms also serve as guides on how toregulate and
manage these member states.

Through the development of these norms, states are guided in their actions both locally and
internationally. Due to the presence of an independent international institution, issues that are present
across different national borders will be addressed and recognized. There will be a body to monitor
actions of member states and investigate those actions against humanity (e.g. human rights violation). In
the end, we can claim that international organizations have been embedded in the lives of people, as
they perform multiple functions— tasks that aim to improve the lives of people by pursuing different
development agendas.